Still have a small mortgage cause I didn't buy a house til I was 45, but that's no problem-if I sold this house and had to rent I'd still have a monthly housing payment so it's a wash. Do want to stay here.

I beleive I can live on 30,000 per year net and do it easy. Want to do some travelling on the bike but mostly want to RELAX for at least the first two years and exhale. I am in Management and it's VERY stressful.

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I beleive I can live on 30,000 per year net and do it easy. Want to do some travelling on the bike but mostly want to RELAX for at least the first two years and exhale. I am in Management and it's VERY stressful.

So..lump sum or monthly pension?

There's a lot to consider isn't there?

First of all, it sounds like the women in your family have a pretty impressive history of longevity. That is certainly a factor.

On the other hand, assuming they don't take it away from you (generally, they legally can), "retiree health benefits until 65 at no cost" is a winning lottery ticket. Congratulations on that -- this is often the single thing that keeps people from being able to retire, and you have that 800-pound gorilla off your shoulders!

So next up: You need an income stream of at least $30K per year (net), adjusted for inflation. After state and federal income taxes that's probably closer to $40K per year. So let's say $40K pre-tax.

I just ran some numbers to see what it would cost a 57-year-old female to purchase a $2100 monthly income stream (I assume no inflation adjustment since you didn't mention one). For a ballpark estimate, I used the Berkshire Hathaway calculator. It says that to purchase a $2100 per month annuity as a 57-year-old single female with no survivorship rights, the cost would be a little under $504,000. So we are looking at a $420,000 lump sum or an income stream that would cost $504,000 to buy on your own. But you also have to look at the financial strength of your employer and ask yourself if the pension seems safe for your lifetime.

But there's more to it than that! You have $650K in investments and will have Social Security at some point (the age to file at is a separate question!), so if you took the lump sum in lieu of the pension, you'd have a little less than $1.1 million. Even with a relatively conservative 3% drawdown off of (say) a 50/50 asset allocation which seems fairly reasonable in your situation, that could produce $33,000 in annual income. But in reality, you may need to withdraw a little more than that until you start on Social Security, at which time you could dial the withdrawal rate down to perhaps 2.5%.

I think the math seems to work either way, assuming you are very confident about your ability to live on $30K after tax. So that said... lump sum or pension? Hard to say. The cost of an annuity is unusually high now because of bad interest rates, so it seems less attractive to take the pension now even though the cash value of the income stream at *current* interest rates exceeds the lump sum being offered (which you could invest appropriately). On the other hand, the women in your family seem to live a long time, which would favor the guaranteed income stream. But if you took the pension, if it has no COLA kicker you'd need to set up your other investments to help you cope with inflation.

Perhaps others who have been here can fill in some gaps. Either way, if you are confident you can live the lifestyle you want on $30K after tax and you have that health insurance beast tackled, I think you're in reasonably good shape either way.

__________________"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?"-- Joe Dominguez (1938 - 1997)

I realize I left out the SS portion..I think I WILL plan on taking it at 62...

According to SS site, my stop work age of 57 will mean @ 1600/mo of SS at 62. Add to monthly pension of 2100 per month, that would make guaranteed income stream of 3700/mo at 62, and I could cut back on withdrawal rate from my savings until 70 1/2 when I would have to start min. withdrawals.

My company IS strong, BUT that's what everyone thought about if they retired from GM 40 years ago!!!! Even with pension guarantee etc, it could still be risky. No COLA either.

Who'd have thought that now that I CAN retire I have to think about these 2 scenarios til my head hurts!!!! And it is ALL I think about!

Congratulations on your nice financial cushion, LCountz! My only suggestion is to think through thoroughly your budget in retirement. You said you think could live on 30k pretty easily. But after a couple of years, will you be happy on that? If so you are in great shape. How much difference is there between your projected retirement budget and your current budget? I say that because I didn't retire until I knew with certainty my working budget was the same as my retired one would be as I didn't want to downscale my lifestyle. Even though it has worked out fine, I can't seem to quit working altogether as it is addicting to watch my cash grow!

You say you have $650k in 401k/IRA/Cash. Having enough is one thing but it is also important to have penalty free access to those funds.

Does your 401k allow penalty free withdrawals since you are leaving service after age 55? (so do, some do not). If not, do you have enough cash to pay your living expenses from retirement to age 59 1/2 until you can make penalty free withdrawals from your IRA?

My company IS strong, BUT that's what everyone thought about if they retired from GM 40 years ago!!!! Even with pension guarantee etc, it could still be risky. No COLA either.

Who'd have thought that now that I CAN retire I have to think about these 2 scenarios til my head hurts!!!! And it is ALL I think about!

Pension?Lump sum?Pension?Lump Sum?Pension?Lump Sum?

Thanks again for your fast, detailed answer....

I wish I had a crystal ball to foresee the future of your company. I believe this decision, like most, comes down to doing the research on your own and trusting your instincts. You've got a pretty big part of your assets in your company pension. If you take a lump sum, you can count on either a very low rate on ultra-safe investments or taking on some risk on investments which will yield more. Would this risk be greater than staying invested in your company in the form of a pension? I sure don't know.

Bottom line, I think you're in fine shape and have a long retirement to look forward to. Hope to hear more from you 'round here.

__________________
"To know what you prefer, instead of humbly saying Amen to what the world tells you you ought to prefer, is to have kept your soul alive". Robert Louis Stevenson, An Inland Voyage (1878)

You seem to be in a great position. How strong is the company behind the pension?
Think Kodak, many airlines, Worldcom, Enron, etc -- all companies that looked strong at one point. Plus you get no inflation protection. If you live 24 years, your living costs will double in just 24 years at only 3% inflation.

Thinking of taking SS at 62? Are you sure? Especially if you expect to live a long life
that may not be the best decision.

The biggest thing I see is that you "believe" you can live on $30k a year - what's your monthly budget like? If you haven't been tracking, can you go back a few months with your bank statements and see what your expenses are?

If your bare bones expenses are closer $25k, your pension could cover that, and you'd only have to dip into your savings for extra stuff.

Of course I don't know the tax details of pensions, and I've never thought of lump sum vs pension, as I'll never have one, but all your numbers look pretty good to me!

Question: do you have to pay any taxes if you take the lump sum? If so, I'd vote for the monthly pension. And, check out SS at 62 or later. You gain about 8% monthly payments for each year you wait until age 70. And, if you live past 90 you'll gain a lot. Don't forget you'll want to have fun and travel....hard to do on 30k a year. But, with all your other money invested appropriately for a retiree, you'll really do well.

Question: do you have to pay any taxes if you take the lump sum? If so, I'd vote for the monthly pension. And, check out SS at 62 or later. You gain about 8% monthly payments for each year you wait until age 70. And, if you live past 90 you'll gain a lot. Don't forget you'll want to have fun and travel....hard to do on 30k a year. But, with all your other money invested appropriately for a retiree, you'll really do well.

good luck......have fun.

Usually a lump sum pension would be rolled into an IRA and then taxed as distributions are made from the IRA, but any distributions from the IRA prior to age 59 1/2 would be subject to early withdrawal penalties unless you did a 72t.

I also have long living ladies in my family.
My approach: I am confident to manage several investments at my current age + 20 years forward (54-74).
However, I think thereafter I will appreciate more and more to receive a monthly amount of pension and SS which is sufficient for all my basic needs and to manage some decent savings for my extras.
So we chose to use pension schemes for basics while also saving through some other investments.
(Our pensions do not carry insolvency risks. Otherwise it would make a huge difference to me).

The biggest thing I see is that you "believe" you can live on $30k a year - what's your monthly budget like? If you haven't been tracking, can you go back a few months with your bank statements and see what your expenses are?
!

I think this is a great point. How closely have you been tracking your expenses? If you are not already doing so, I recommend you start tracking your expenses closely. Can you go back and figure out approximately how much you have spent in the past year, or last six months?

I beleive I can live on 30,000 per year net and do it easy. Want to do some travelling on the bike but mostly want to RELAX for at least the first two years and exhale.

Geez, I guess I focused on the single frugal woman who wants to do some traveling on her Harley and forgot to read the rest of the post! If I was a little closer I'd be trying to get a dinner date, lol!

Anyway, with slightly north of a million bucks and a desired withdrawal rate of 3%, you're done, especially with SS in your future. Pension/Lump Sum, big decision, but likely won't matter much as long as the employer stays solvent. States do have insurance up to limits on pensions, correct? How much is PA? If it covers what you're getting, I might take the pension and fight inflation with taking SS later and by investing the $650k.

Congrats, and keep the shiny side up!

__________________
When you walk in the shadow of insanity, the presence of another mind that thinks and acts as yours does is something close to a blessed event. -Robert Pirsig, Zen and the Art of Motorcycle Maintenance

The biggest thing I see is that you "believe" you can live on $30k a year - what's your monthly budget like? If you haven't been tracking, can you go back a few months with your bank statements and see what your expenses are?

+1

It seems me there are two question. Do I have enough assets to withdraw 35K or so to get 30K a year net? Yes you have enough money as Ziggy said.

The second question is can I really get by on 30K. If you have been tracking your expensive diligently and Quicken or Mint say yup that's what I've been spending than great. If on the other hand you haven't been tracking expense so closely (and lets face it most of us don't).

Then my next question is what is your current salary, if it is <$60K and you've manage to save $650K than you'll be fine. On the other hand if it 100K+ cutting back to 30K a year is big stretch. Between those numbers you'll really want to do as suggest and track expenses.

Anyway, with slightly north of a million bucks and a desired withdrawal rate of 3%, you're done, especially with SS in your future. Pension/Lump Sum, big decision, but likely won't matter much as long as the employer stays solvent. States do have insurance up to limits on pensions, correct? How much is PA? If it covers what you're getting, I might take the pension and fight inflation with taking SS later and by investing the $650k.

Congrats, and keep the shiny side up!

She said that she worked for a Megacorp, so her pension would be insured Federally by the PBGC, not the state of PA.

From the tables linked above by travelover, given her age and marital status, it appears that her entire $2100 would be beneath the PBGC ceiling.

I've been drafted to watch over my mom's investments, so have been talking to her a lot about her worries at age 80. She is worried about long term care, and being a burden on her kids. I say this cause one would expect that a reliable income is important to her and will be to most at her age. She is more than covered, but I want to suggest you take the $2100 pension so you don't need to worry about your needs when you get to that point. Ypu'll need to cover the cola with your investments order time. But since you can't generate a reliable $25K from the lump sum, take the payments and be happy to have two reliable incomes plus your pile-o-cash.

Based on what I read here, I say -- DO IT!!!! You appear to have ample funds and you always go back to work part time if you find that you are draining too much of your savings. I LOVE how you don't have to worry about healthcare. That alone is worth about $10K annually. I don't know whether the lump sum or pension is best but you lump amount is pretty good. That one you'll want to run through spreadsheets.

You so sound like me. As a Senior Manager at my Megacorp and laying off 1000s of people - sending their jobs to other countries --I couldn't take the stress anymore. I asked for opinions here at 52, went on CNBC "On The Money" at 56, begged in vain to be laid off, and voluntarily retired a few months later in the Class of 2011. I'm happy, losing excess weight, and enjoying my freedom. I may return to work someday doing something different but I'm not planning on it.

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